Hutchison Whampoa’s $5bn bonds due 2010, 2014 and 2033
Date: November 19, 2003
Bookrunners: Bank of America Merrill Lynch, Citi, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley
Eleven years after Hutchison Whampoa launched its giant $5bn bond issue, the transaction remains the joint-largest international bond to come out of Asia ex-Japan. The fact this record has stood for so long indicates just how difficult raising funds in such a quantity is.
At the time it was regarded as highly ambitious, yet supported by what at the time was a huge group of bookrunners Hutchison comfortably sold the three tranches of debt to investors in Europe, the US and Asia. It was to follow this deal with a set of other jumbo transactions during 2003, including a major euro issue. But it was this transaction that became, and remains, the testament to the ability of the region’s borrowers to compete on a level playing field with European and US peers.
Hutchison Whampoa $3bn 2.875% exchangeable bond issue
Date: September 12, 2000
Bookrunners: Bank of America Merrill Lynch
Hutchison Whampoa’s decision to divest itself of Vodafone shares through an exchangeable bond issue looked bold. The conglomerate wanted to sell an unusual structure at a larger size than the region had ever witnessed before.
However, the deal ended up a strong success, and indicated the deepening demand for high quality Asian company deals – although it didn’t hurt that the underlying asset was that of a UK blue-chip.
China Telecom (Hong Kong)’s $4.23bn IPO
Date: October 16, 1997
Bookrunners: Goldman Sachs, China International Capital Corp. (CICC)
The initial public offering (IPO) of China Telecom wasn’t the first privatisation via international equity offering from China, but it was the most important. The listing (which changed its name to China Mobile in 2000) marked the first time the government had supported an IPO privatisation on this scale from China. It was also to be China’s first publicly listed telecom company.
However, the process took place just a few months after the beginning of the Asia financial crisis. And Beijing wanted a big, dual listed deal that was a success. It was a daunting mandate.
Yet the deal ended up a great success, the biggest China IPO at that time, with a dual Hong Kong and New York listing. Investors liked the idea of Beijing injecting mainland assets into a Hong Kong listed company. The strong result led to more privatisations, giving investors more opportunity to get exposure to the country’s rapid economic rise.
Lenovo Group’s $1.75bn acquisition of International Business Machines Corp.’s (IBM) personal computer business
Date: May 2, 2005
Advisers to acquirer: Cazenove, Goldman Sachs
Advisers to seller: Bank of America Merrill Lynch
Lenovo’s purchase of IBM’s PC business in 2005 looked like a corporate metaphor for China’s ascent against the US. In truth, IBM had little choice but to sell the business. By 2005 it was being priced out by cheaper rivals in Asia. Lenovo, meanwhile, realised the opportunity it had to meet the interest of Chinese consumers in possessing mobile computers and having internet access.
It fully capitalised on its successful purchase of IBM’s PC business, quickly turning the division into a China-focused operation and using it as a springboard to become world’s largest PC producer in 2012. It is also one of the very few Chinese companies to become a truly internationally-recognised brand.
Alibaba Group Holding’s $8bn three-tranche loan
Date: July 12, 2013
Mandated lead arrangers and bookrunners: ANZ, Bank of China, Citi, Credit Suisse, DBS, Deutsche Bank, Goldman Sachs, HSBC, ING,
JP Morgan, Mizuho Bank, Morgan Stanley, RBS
Alibaba Group’s $8bn loan in 2013 was not its first big facility, but it was its largest – and indeed the biggest syndicated loan in the Asian internet and tech sector.
Notably in the deal, syndicate members had to put down $200m commitments for an asset-light company. But the strength of its brand enticed plenty of banks, and the entire $8bn loan was comfortably covered by 22 banks within five weeks in the market.
Telekomunikasi Indonesia $1.68bn IPO
Date: November 14, 1995
Bookrunners, international tranches:
Goldman Sachs, Lehman Brothers, Bank of America Merrill Lynch, UBS
Bookrunners, Indonesia tranche: Bahana Securities, Danareksa Sekuritas, Jardine Fleming Nusantara, Makindo Securities
The privatisation of Telekomunikasi Indonesia marked the most ambitious fund-raising effort at that time on the country's local market. The company conducted a dual listing, placing most of its shares locally but also offering a large portion onto the New York Stock Exchange.
Investors in both areas were enticed by the possibility of getting exposure to this fast-growing nation with a big and youthful populace. Orders easily covered the deal. The hope was that this would lead to many more jumbo listings. Unfortunately it was to be less than a year and a half before the Asia financial crisis struck. PT Telkom’s deal remained the largest IPO by an Indonesian company until coal producer Adaro listed in 2008.
BOC Hong Kong (Holdings) HK$20.76bn ($2.66bn) IPO
Date: July 20, 2002
Bookrunners: BOC International Holdings, Goldman Sachs, UBS
The flotation of Bank of China’s Hong Kong operations was effectively a dry run for the major Chinese bank equity privatisations that were to shortly follow. It also wasn’t an easy deal to do. Bankers today recall how then Bank of China president Liu Mingkang was suspicious of the level of internal managerial change that would be required, as well as the level of information disclosure to support the deal.
It also had the disadvantage of being a deal for a Bank of China subsidiary with very limited exposure to the fast-growing China economy. Yet investors were still excited by the name, and the deal ended up garnering strong demand. It also provided Liu with an ideal template for the state-owned bank IPO privatisations to follow. He moved to the China Banking Regulatory Commission shortly after this deal was done and directly oversaw their restructurings.
MTR Corp.’s HK$10.69bn ($1.37bn) IPO
Date: October 1, 2000
Bookrunners: Goldman Sachs, HSBC, UBS
Hong Kong’s first major privatisation involved the crown jewel of its transport infrastructure – its mass transit rail network. In truth, the sale of 20% of MTR never looked anything but a likely success. MTR Corp. is a profitable, polished company that boasts gleaming infrastructure and helps fund it with a large property portfolio. It boasts utility-like revenue flows from its daily commuters. And its presence in Hong Kong life guaranteed it enormous retail investor demand.
The IPO ended up going seamlessly, pricing its shares mid range to keep them popular on the back of heavy investor orders.
Singapore Telecommunications’ S$4.33bn ($2.74bn) IPO
Date: October 28, 1993
Bookrunner: Goldman Sachs
In the early 1990s Asia was seen as having few stocks of much size, particularly in Southeast Asia. That changed with the privatisation of Singapore Telecommunications (SingTel).
The deal was the first major telecom privatisation in the whole of Asia ex-Japan, as the Singapore government looked to prepare it for competition (introduced in 2000). The IPO itself was a success and it freed management up to operate independently and seek growth. SingTel has emerged as one of the region’s leading telecom companies, with investments in around 20 countries in Asia and further abroad. The deal’s success led other regional governments to consider similar sales.
Industrial & Commercial Bank of China’s HK$170.57bn ($21.93bn) IPO
Date: October 20, 2006
Bookrunners: Hong Kong: Bank of America Merrill Lynch, ICEA Capital, CICC, Credit Suisse, Deutsche Bank
Bookrunners: Shanghai: CICC, Citic Securities, Shenying & Wanguo Securities, Guotai Junan Securities
ICBC’s IPO followed the privatisations of both China Construction Bank and Bank of China. But it still posed a challenge. The bank’s flotation was bigger than both of its rivals – in fact it was to become the largest bank IPO ever. Additionally, the deal was to be the first to conduct a simultaneous dual listing, with ICBC placing its shares in Hong Kong and Shanghai on the same day.
However, it went swimmingly, raising nearly $22bn on the back of a whopping $500bn in orders. Investor enthusiasm was understandable; ICBC is China’s biggest bank, it boasted $815bn in assets and it was forecasting a 47% leap in profits to almost $7bn. Those were not bad fundamentals to be betting on.
Taiwan Semiconductor Manufacturing Company (TSMC)’s $494m follow-on offering
Date: October 8, 1997
Bookrunners: Goldman Sachs
Back in 1997 Taiwan Semiconductor Manufacturing Company (TSMC) was an aspiring chip maker amid a competitive field. However, chairman Morris Chang wanted to break new ground. He had listed his company in Taiwan on September 5, 1994, and in June 1997 his company issued a $350m European convertible bond.
Just over three months later TSMC took a bolder step, issuing American Depositary Shares. The sale worked a treat, with the issue generating $594.7m for TSMC, which helped to catapult it towards its subsequent transformation into a semiconductor giant. It hasn’t been shy about using the equity markets since.
Tata Motors’ $2.3bn acquisition of Jaguar Cars and Land Rover
Date: June 2, 2008
Advisers to buyer: Citi, JP Morgan
Advisers to seller: Goldman Sachs, HSBC
Three and a half months before the nadir of the global financial crisis, Tata Motors announced that it had bought the UK-based premier car makers Jaguar and Land Rover from their former owner, the cash-strapped Ford Motor. The acquisition followed 10 months of discussions between the two, along with rival bids.
Sceptics felt that Tata Motors’ purchase of the marquee brands would not work out well, arguing that the company lacked the ability to rehabilitate two car brands that lacked the reliability of their German, Korean and Japanese rivals. But Jaguar and Land Rover have gone from strength to strength since, bolstered by bold and innovative new designs that have caught the eye of the well-to-do around the world, including the promising market of China.
BTS Rail Mass Transit Railway Growth Infrastructure Fund Bt62.51bn ($2.13bn) IPO
Date: April 4, 2013
Bookrunners, international tranche: Morgan Stanley, UBS
Bookrunner, local tranche: Phatra Securities
Thailand’s biggest private sector equity offering was an impressive deal, and its structure – an infrastructure fund – marked the first usage in the country. Bangkok Transportation Systems (BTS), Bangkok’s sky train operator, wrapped 90% of the revenues it gains from the city’s transportation landmark into the special purpose vehicle infrastructure fund, in which it would hold a 33% stake post-IPO.
The structure gave BTS the money it needed to bid on the Thai government’s plans to extend new rail services across the congested city. It also gave the Bangkok Stock Exchange a new blue-chip benchmark stock. Investors loved the listing, and it priced at the top of the mooted range.
People’s Republic of China Rmb15bn ($2.4bn) three tranche bond issue
Date: August 17, 2011
Bookrunners: Bank of Communications
The offshore renminbi bond market had been up and running for two years by the time China’s Ministry of Finance became serious about offering some benchmarks. Its third issue of offshore renminbi debt to institutional investors hit the mark though. It consisted of Rmb6bn of 0.6% three year bonds, Rmb5bn of 1.4% five year bonds and Rmb3bn of 1.94% seven year debt. All were tight yields, but demand among investors to put the renminbi into assets set to enjoy currency appreciation meant this was no problem. A Rmb5bn two year retail tranche was also priced in the weeks following this deal.
The transaction served as a good mini sovereign yield curve, while demonstrating the level of debt that could be issued in this new market. That served as a useful tool for the borrowers that were to follow.
Coal India Rs154.68bn ($3.43bn) IPO
Date: October 25, 2010
Bookrunners: Bank of America Merrill Lynch, Citi, Deutsche Bank, Enam Securities, Kotak Mahindra Capital, Morgan Stanley
The privatisation of Coal India marked the largest initial public offering in India in years. It was also a good play on the country’s mounting hunger for power, which in India is largely funded by coal. Investors were happy to see that it would be liquid too. Demand ended up outpacing the deal size by 15 times.
That ensured good secondary performance too. Upon pricing, Coal India’s shares performed well. The shares traded up immediately and have almost always remained above their initial price ever since. In a country that has suffered from some troubling equity conditions in recent years, Coal India has remained a good investment.
Newbridge’s $149.14m acquisition of 17.89% of Shenzhen Development Bank
Date: December 30, 2004
Advisers to buyer: Morgan Stanley
Advisers to seller: Citi
TPG’s purchase of a minority stake in mid-sized Chinese lender Shenzhen Development Bank through subsidiary Newbridge in 2004 was small, and only for a minority stake in the bank. But it proved to be one of the most lucrative investments ever made by a private equity company in Asia.
TPG kept its stake in the bank for six years, up until insurance company Ping An came sniffing around in May 2010. The private equity company was happy to exchange its shares in the bank for a 4% stake in Ping An, or 299m shares, and it then sold them for roughly 16 times the amount it originally paid. It underlined just how much opportunity in the region exists if investors are prepared to be patient.
Tsingtao Brewery’s HK$763.3m ($98.6m) IPO
Date: June 28, 1993
Bookrunner: China Development Finance
The initial public offering (IPO) of Tsingtao marked a new effort by the Chinese authorities to begin opening the country to international finance via H-share offerings on Hong Kong’s stock exchange. Tsingtao was a relatively small start, but it was an important one.
The deal for the Qingdao-based company went very well, and demonstrated the possibilities for Chinese companies listing in Hong Kong. That was to lead to a rising tide of deal flow as Beijing began to privatise.
PetroChina’s $2.89bn IPO
Date: March 30, 2000
Bookrunners: CICC, Goldman Sachs
PetroChina’s decision to sell its shares onto the New York Stock Exchange via American Depositary Shares looks like it should have been simple. But it faced problems. Big ones.
China was finalising its entry into the World Trade Organisation at the time and labour and human rights groups placed all the pressure they could onto investors, regulators and politicians in the US, trying to get them to kill the deal. Had they succeeded, China’s international fund-raising efforts could have been set back by years. But international investors were interested enough to overlook the political risk. Goldman Sachs and CICC ensured that PetroChina ended up with a successful IPO, albeit smaller than the $7bn it originally envisaged. China’s WTO entrance was to follow.
Hong Kong Exchanges & Clearing’s $2.15bn acquisition of LME Holdings
and London Metal Exchange
Date: December 6, 2012
Advisers to acquirer: Rothschild, UBS
Advisers to seller: Moelis & Co
Hong Kong has not been the world’s leader for volumes of initial public offerings for several years now, but the city’s bourse operator has not let up on ways to ensure it remains internationally relevant. Chairman Charles Li made a particular bid to ensure this with Hong Kong Exchanges & Clearing’s (HKEx) purchase of the LME Group in 2012.
The acquisition cemented the HKEx as a multi-national operator of instruments spanning several financial markets and geographies. It also ensured the bourse would be in prime place for any serious development of the commodity markets in Asia, an event long anticipated but still yet to take place in any serious fashion.
Republic of Korea’s $4bn two tranche bonds due 2003 and 2008
Date: April 8, 1998
Bookrunners: Citi, Goldman Sachs
By 1998 South Korea was hurting. The Asian financial crisis had knocked the country sideways, revealing the foolishness of the government and many of its corporates for having relied so heavily on short term, unhedged US dollar borrowing. The International Monetary Fund (IMF) offered funds – $21bn in total as part of a broader $57bn package – but only if the country’s central bank immediately enacted some tough measures, including jacking up interest rates.
But Korea needed still more money. So it launched at the time the largest bond issue from Asia. And it worked. Investors knew the IMF was helping Korea, while the deal offered a coupon rate of 8.75% for the five year bonds and 8.875% for the 10 year tranche; that was high yield pricing for a country still rated ‘BBB-’. They were prepared to take the risk.
Southern Co’s $2.7bn acquisition of 80% of Consolidated Electric Power Asia (CEPA)
Date: January 29, 1997
Advisers to acquirer: Morgan Stanley
Advisers to seller: Peregrine Capital, Anglo Chinese Corporate Finance
Hopewell Holdings has made its money pioneering infrastructure for decades, and its best asset was its majority ownership of CEPA, a collection of electricity generation assets that chairman Gordon Wu had bought or built across Asia, especially in China.
But by 1996 Wu’s appetite for construction had left Hopewell HK$22bn in debt. Wu saved his company by leading the sale of an 80% stake of CEPA to leading US electricity producer Southern Company. The deal represented was a vital deal for the Hong Kong builder, and it represented the recognition of the potential of the economies of China and Asia in general.
Shuanghui International Holdings’ $7.1bn acquisition of Smithfield Foods
Date: September 26, 2013
Adviser to acquirer: Morgan Stanley
Adviser to seller: Barclays
There is a reason foreign brands are popular in China. The country’s citizens by and large don’t trust the quality of their local producers. WH Group, the Hong Kong-headquartered pork producer formerly called Shuanghui, decided to get around this by buying Smithfield Foods, its US peer. The Virginia-based Smithfield was a motivated seller too, having become unprofitable due to the rising cost of animal feed.
Shuanghui eventually paid a 31% premium to Smithfield’s share price, or 7.4 times Ebitda – exactly the average price for meat manufacturer deals in recent times. WH Group may have become c arried away by its success, failing in its attempt to follow up with an overly expensive IPO last month. But the original deal remains a smart piece of M&A.
Pacific Century Regional Developments’ $28bn acquisition of 54% of Cable & Wireless HKT
Date: August 17, 2000
Advisers to acquirer: Bank of China International, Citi, Credit Suisse First Boston, Morgan Stanley, UBS
Advisers to seller: Greenhill, ING Barings, Merrill Lynch, Robert Fleming
Pacific Century CyberWorks’ (PCCW) acquisition of a majority stake in Hong Kong Telecom (HKT) sums up the hubris of the dotcom boom times. In February 2000 the internet software company, created by Richard Li, son of Hong Kong billionaire Li Ka-shing, offered to pay for the stake in HKT through one third cash and two thirds shares, taking advantage of its dotcom bubble-inflated valuation of HK$320bn.
PCCW ended up offering Cable & Wireless HKT shareholders either shares in itself at a 1.1 times exchange rate, or HK$7.23 in cash and 0.7116 new PCCW shares for each share they owned. The company also arranged a A$20bn ($18.56bn) loan facility to help fund the acquisition, which C&W HKT’s board approved on March 28. Cable & Wireless shareholders approved the sale to PCCW on June 13 – the same month the dotcom bubble burst. It was fortuitous timing for PCCW; less so for Cable & Wireless.
AIA Group’s HK$159.08bn ($20.49bn) IPO
Date: October 22, 2010
Bookrunners: Bank of America Merrill Lynch, Barclays, CIMB Securities, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, ICBC International, JP Morgan, Morgan Stanley, UBS
AIG did not want to sell its AIA subsidiary, but the US insurer had swallowed plenty of government money to survive the global financial crisis. Washington wanted to be paid back quickly. So AIG opted to sell one of its crown jewels.
Investors jumped at the chance to own the sort of blue-chip asset that rarely comes about (even though AIG had more stock waiting it would sell down in subsequent offerings). The deal was a huge success, garnering $500bn of orders. It now stands as one of Hong Kong’s bluest of blue chip stocks.
KKR and Affinity Equity Partners’ $1.81bn acquisition of Oriental Brewery
Date: July 24, 2009
Advisers to acquirers: ING, Citi, Goldman Sachs, HSBC, Nomura
Advisers to seller: JP Morgan, Deutsche Bank, Lazard
Back in 2009 Anheuser-Busch InBev (AB InBev) sold Korea’s Oriental Brewery to private equity companies KKR for $1.8bn. On January 20 this year, AB InBev bought it back again – for $5.8bn. In four and a half years, KKR and Affinity – which had bought 50% of the investment from KKR shortly after it made it – made $2bn each.
In fairness, AB InBev only sold the brewery because it needed to cut debts in 2009 following InBev’s $52bn takeover of Anheuser-Busch. And KKR and Affinity have overseen Oriental Brewery’s rise to become Korea’s leading beermaker with the earnings twice as large. The deal is a nice example of savvy private equity investors adding value to the assets they buy. AM